Interest rates have increase by 1.75 per cent so far – and more rises are predicted. But how far will they go up and what will be the impact be on the property market?
All experts see the property market declining but by how much and for how long is the question.
And some economists are starting to ask if we have overblown the bad news – maybe rate rises won’t be that high and maybe the property market is in a stronger position than we thought.
Economists are betting that the RBA’s interest rate hiking cycle will peak in March next year – at a rate of 3.2 per cent and dropping fairly soon afterwards
Previously the markets had been expecting rates to continue rising – for longer and higher – reaching 3.65 per cent in July and staying there for a lengthy period.
As the Reserve Bank pointed out this week in announcing a 0.5 per cent rate rise, it “is not on a pre-set path.” This implies that, at some point, the Reserve Bank will pull back from its recent rate rise trajectory.
It’s difficult to see the Reserve ramping rates up too much, even a 3 per cent cash rate has a serious impact on home-owners
And while rate rises are not good news for borrowers the Reserve Bank remains upbeat about the economy, predicting unemployment will continue to strengthen, bottoming out at about 3.25 per cent later this year.
Undoubtedly, property’s boom-times are over. But if rates don’t go up as much as feared and immigrants return, who’s to say that the market won’t see a new lease-pf-life sooner rather than later?
This week a run-down terrace near Sydney’s Redfern station sold for $1.85m. It had originally been advertised at $1.5m but then the price guide dropped to $1.25m – such a significant price hardly indicates the market is in decline. Maybe there’s a stronger pulse than expected?
For real estate and mortgage brokers, there’s no doubt that we are in for a few pessimistic months. But opportunities will still occur – it’s a question of being ready. Maybe now is time to do more training, to update skills while things are relatively quiet.